Published: Tuesday, May 20, 2014 at 6:01 a.m.

Last Modified: Monday, May 19, 2014 at 8:43 p.m.

Susan Gildersleeve says the Citizens Co-op board of directors is confused about its product. After all, she can buy wholesome food at Ward’s Supermarket or the Union Street Farmers Market. What sold her on the cooperatively owned grocery store was its promise of ethical business practices.

“It says right on the wall there that they put people and the planet before profit, and that was the only place in town I could go and feel good about the kind of workplace they were and just their kind of ethics — and when I found out that wasn’t actually true, it was just something that was painted on the wall, I stopped wanting to shop there anymore,” she said.

Gildersleeve is not alone. After its two most profitable months ever, sales dropped 26 percent in April after the firing of five employees by a new general manager hired to turn business around. The fired employees and their supporters picketed the store, and a power struggle has ensued between the board that hired the manager and a group of members concerned about the firings and the role of workers in running the business.

In the latest twist, the board on Wednesday rejected a proposal from the group that two of five directors resign and be replaced by three concerned members selected from a slate of 10 volunteers.

In a letter addressed to “Concerned Members,” the board explained that the resignation of the two named directors elected by the general membership would be less representative of member desires. Of the current five directors, three were elected and two were appointed to replace directors who had resigned since the controversy started.

Instead, the board said it would stick to its prior compromise proposal to move up director elections from September to June 24 and put seven seats on the ballot, including those of directors with a year remaining on their terms.

On Thursday, the board appointed Melissa Lynch as worker representative after she was nominated to the board by fellow employees. That the position had gone unfilled since February has been a bone of contention for the fired employees and their supporters.

The idea for the co-op started with two friends — Gretchen McIntyre and Liz Nesbit — who wanted a place open seven days a week to offer the kind of locally grown and organic products available at weekly farmers markets, supplemented by organic and fair-trade brand-name groceries. It is cooperatively owned, with owners paying $100 for a lifetime membership in return for voting rights to elect the board and access to special sales, as well as a share of dividends based on how much they spend in the store. Investors who paid $500 per share also get an 8 percent annual dividend.

Citizens Co-op opened in July 2011 in an 1,800-square-foot space at 435 S. Main St., next to the Civic Media Center. It started with nearly 800 members and has since grown to about 1,800, although not all members have remained active. Customers do not have to be members to shop there.

The root of the ongoing conflict stems from disagreements about whether workers in a co-op should share in the store’s management or report to a general manager.

Board Chairman Lucian Kragiel said the store first operated with three co-managers and lost an average of $3,500 a month for its first 21 months. He was elected to the board 2˝ years ago on a platform of advocating top-down management.

The co-op hired a general manager who worked for six months last year, during which time the store nearly broke even with an average loss of $100 per month, Kragiel said.

The manager left abruptly for family reasons, “so it drifted into a co-management deal again,” he said, and the store lost an average of $1,600 a month.

The board hired Lisa McNett, who came with six years of experience as a general manager and more as assistant manager in the restaurant business. She started as general manager of the co-op on Feb. 2.

Over the next two months, the store would show profits of $1,857 and $2,480.

McNett said the difference was in putting in new inventory controls so the store did not continue to stock up on unsold items or bring in new items that were not budgeted, as well as making sure products were priced correctly in the cash register.

Brett Ader, who at 30 is the oldest of the five fired workers, said McNett was given credit for changes that started before she arrived.

“She came in when we were starting to see the effects,” he said.

The bigger issue was how well McNett and the workers would work together.

McNett said some of the workers resisted having to answer to a manager.

“I had to keep going back to the board and saying, ‘Are you sure I’m in charge because no one’s listening,’ ” she said.

Ader said there was no conflict.

“Everyone went out of their way to be helpful and show her how things worked and bring her up to speed,” he said.

Ader said no one told the employees to stop doing what they had been doing, which included meetings and emails to solicit worker consensus before making decisions, including under the previous GM.

Then the board called employees to a mandatory meeting on Feb. 18.

Kragiel said he told employees at the meeting they would be working under one manager and that there was never any document or agreement saying the workers would be making business decisions.

“I would say this is the reality of what you’re working in. If it doesn’t work for you, it might be better to look elsewhere,” Kragiel told The Sun.

Kragiel later admitted in a timeline of events that he was “quite blunt” and wishes he had been less defensive.

After the meeting, two senior employees lost their jobs when one was fired and the other’s position under the board was eliminated, although accounts differ as to whether she was offered another job under the GM.

Ader said the meeting and job losses dealt a blow to the remaining employees.

“We felt they were making an example of them and making us feel ‘if you don’t shut up and do what you’re told, this could be your fate, too,’ ” he said.

Seven employees decided to unionize to try to ensure they would have a voice in the co-op. On March 11, they sent a letter to the GM demanding to be recognized as a union and emailed co-op members of their intention using the co-op’s email list. In a follow-up email the next day that the board has described as “slanderous,” the employees wrote that they have “witnessed actions from co-op’s management and the board of directors that directly threaten the stability of the business.”

The board responded in writing that it is not opposed to a union, but that one should be established by petitioning the appropriate agency and conducting a supervised election of all employees.

On March 24, McNett sent emails to five of the seven workers before the start of business informing them that they had been fired for theft and misuse of the company email database system, and for refusing to cooperate with an internal investigation into the theft.

The fired employees and supporters started picketing outside of the store that afternoon and later were joined by two more employees who went on strike in protest.

On March 27, the fired workers filed a complaint with the National Labor Relations Board alleging they had been discharged to discourage membership in a labor organization. The board hired attorney Rod Smith to defend the co-op.

Even before workers were fired, members started taking sides. A March 13 membership meeting with the board drew nearly 200 people, many of whom expressed support for the workers.

Concerned members started a petition that drew 224 signatures at change.org asking that the board step down. A May 11 meeting that produced the resignation proposal drew about 80 people.

McNett said the co-op draws a lot of politically driven people who are interested in food issues. “Food is very political,” she said.

Many have now turned their attention to the co-op’s leadership, calling them “bourgeois,” “profit hungry” and “power mongering,” she said.

At meetings and in Facebook posts, members have said the co-op was founded on the belief that the workers have rights beyond regular workers, that it was not meant to be top-down, that its cooperative values have turned corporate.

Wayne Cope said he has heard the argument that a co-op can’t have a GM since he joined his first co-op 36 years ago.

“The fact that somebody would say that means they don’t know about food co-ops,” he said.

He referred to the group of concerned members as an “insurgency” that is out for blood.

“I’ve heard a bunch of people say, ‘It’s not a co-op. I don’t care if it fails.’ They mean that in some way it’s not satisfying something, and they all vary on what they define as a co-op. To some, it’s got a general manager, so it’s not a co-op. That’s false.”

In his timeline, Kragiel said the board received letters of support in a ratio of three to one.

McNett said most of the shoppers she hears from are supportive of the changes she has made in the store.

“If I didn’t have that, if all I had was people coming in and saying they’re pissed off, I would have quit a long time ago,” she said.

Kragiel said a lot of the conflict has come from people who assume the co-op was designed to be cooperatively managed by workers without reading the by-laws.

The co-op’s articles of incorporation say the cooperative is governed democratically by its members for the mutual benefit of its owners, who include patrons, producers and employees.

Its by-laws say the board’s duties include hiring and firing management and defining the duties of management.

McNett said she thinks using the words “worker-owner” has led to confusion, especially since the co-op first tried to operate with multiple managers.

“The words ‘worker-owner’ give that perception that the workers are the owners, and there’s so many other people that own the co-op grocery store as well,” she said.

Ted La Combe is among the concerned members who negotiated the May 11 proposal and volunteered to serve on the board’s transition team that also is asking for more financial transparency and more open meetings.

He said he has heard and understands both sides of the employee firings.

“What could have saved that situation is if it had been handled differently,” he said. “Before somebody gets fired, there should be a discussion about a job performance review, a note in the file. That didn’t happen. It was very sudden. No consultation. No mediation. No effort to try to make things better.”

La Combe said Kragiel has done great things for the co-op but that he is confrontational, which has been a big part of the problem.

When the board turned down the proposal for two members to resign, La Combe said he told appointed board member Rick Nesbit that Kragiel’s resignation might be one of the few moves that would bring members back to the store.

“I told Rick I would not be surprised to see some members give up this effort and just walk away for good,” he said. “The board could win the battle but lose the war.”

Kragiel told The Sun he would resign only if the 10 volunteers would agree to shop in the store and communicate that to the membership.

He said the decrease in sales is making it more difficult to thrive, “but the store is not in danger of going out of business anytime soon.”

<p>Susan Gildersleeve says the Citizens Co-op board of directors is confused about its product. After all, she can buy wholesome food at Ward's Supermarket or the Union Street Farmers Market. What sold her on the cooperatively owned grocery store was its promise of ethical business practices.</p><p>“It says right on the wall there that they put people and the planet before profit, and that was the only place in town I could go and feel good about the kind of workplace they were and just their kind of ethics — and when I found out that wasn't actually true, it was just something that was painted on the wall, I stopped wanting to shop there anymore,” she said.</p><p>Gildersleeve is not alone. After its two most profitable months ever, sales dropped 26 percent in April after the firing of five employees by a new general manager hired to turn business around. The fired employees and their supporters picketed the store, and a power struggle has ensued between the board that hired the manager and a group of members concerned about the firings and the role of workers in running the business.</p><p>In the latest twist, the board on Wednesday rejected a proposal from the group that two of five directors resign and be replaced by three concerned members selected from a slate of 10 volunteers.</p><p>In a letter addressed to “Concerned Members,” the board explained that the resignation of the two named directors elected by the general membership would be less representative of member desires. Of the current five directors, three were elected and two were appointed to replace directors who had resigned since the controversy started.</p><p>Instead, the board said it would stick to its prior compromise proposal to move up director elections from September to June 24 and put seven seats on the ballot, including those of directors with a year remaining on their terms.</p><p>On Thursday, the board appointed Melissa Lynch as worker representative after she was nominated to the board by fellow employees. That the position had gone unfilled since February has been a bone of contention for the fired employees and their supporters.</p><p>The idea for the co-op started with two friends — Gretchen McIntyre and Liz Nesbit — who wanted a place open seven days a week to offer the kind of locally grown and organic products available at weekly farmers markets, supplemented by organic and fair-trade brand-name groceries. It is cooperatively owned, with owners paying $100 for a lifetime membership in return for voting rights to elect the board and access to special sales, as well as a share of dividends based on how much they spend in the store. Investors who paid $500 per share also get an 8 percent annual dividend.</p><p>Citizens Co-op opened in July 2011 in an 1,800-square-foot space at 435 S. Main St., next to the Civic Media Center. It started with nearly 800 members and has since grown to about 1,800, although not all members have remained active. Customers do not have to be members to shop there.</p><p>The root of the ongoing conflict stems from disagreements about whether workers in a co-op should share in the store's management or report to a general manager.</p><p>Board Chairman Lucian Kragiel said the store first operated with three co-managers and lost an average of $3,500 a month for its first 21 months. He was elected to the board 2˝ years ago on a platform of advocating top-down management.</p><p>The co-op hired a general manager who worked for six months last year, during which time the store nearly broke even with an average loss of $100 per month, Kragiel said.</p><p>The manager left abruptly for family reasons, “so it drifted into a co-management deal again,” he said, and the store lost an average of $1,600 a month.</p><p>The board hired Lisa McNett, who came with six years of experience as a general manager and more as assistant manager in the restaurant business. She started as general manager of the co-op on Feb. 2.</p><p>Over the next two months, the store would show profits of $1,857 and $2,480.</p><p>McNett said the difference was in putting in new inventory controls so the store did not continue to stock up on unsold items or bring in new items that were not budgeted, as well as making sure products were priced correctly in the cash register.</p><p>Brett Ader, who at 30 is the oldest of the five fired workers, said McNett was given credit for changes that started before she arrived.</p><p>“She came in when we were starting to see the effects,” he said.</p><p>The bigger issue was how well McNett and the workers would work together.</p><p>McNett said some of the workers resisted having to answer to a manager.</p><p>“I had to keep going back to the board and saying, 'Are you sure I'm in charge because no one's listening,' ” she said.</p><p>Ader said there was no conflict.</p><p>“Everyone went out of their way to be helpful and show her how things worked and bring her up to speed,” he said.</p><p>Ader said no one told the employees to stop doing what they had been doing, which included meetings and emails to solicit worker consensus before making decisions, including under the previous GM.</p><p>Then the board called employees to a mandatory meeting on Feb. 18.</p><p>Kragiel said he told employees at the meeting they would be working under one manager and that there was never any document or agreement saying the workers would be making business decisions.</p><p>“I would say this is the reality of what you're working in. If it doesn't work for you, it might be better to look elsewhere,” Kragiel told The Sun.</p><p>Kragiel later admitted in a timeline of events that he was “quite blunt” and wishes he had been less defensive.</p><p>After the meeting, two senior employees lost their jobs when one was fired and the other's position under the board was eliminated, although accounts differ as to whether she was offered another job under the GM.</p><p>Ader said the meeting and job losses dealt a blow to the remaining employees.</p><p>“We felt they were making an example of them and making us feel 'if you don't shut up and do what you're told, this could be your fate, too,' ” he said.</p><p>Seven employees decided to unionize to try to ensure they would have a voice in the co-op. On March 11, they sent a letter to the GM demanding to be recognized as a union and emailed co-op members of their intention using the co-op's email list. In a follow-up email the next day that the board has described as “slanderous,” the employees wrote that they have “witnessed actions from co-op's management and the board of directors that directly threaten the stability of the business.”</p><p>The board responded in writing that it is not opposed to a union, but that one should be established by petitioning the appropriate agency and conducting a supervised election of all employees.</p><p>On March 24, McNett sent emails to five of the seven workers before the start of business informing them that they had been fired for theft and misuse of the company email database system, and for refusing to cooperate with an internal investigation into the theft.</p><p>The fired employees and supporters started picketing outside of the store that afternoon and later were joined by two more employees who went on strike in protest.</p><p>On March 27, the fired workers filed a complaint with the National Labor Relations Board alleging they had been discharged to discourage membership in a labor organization. The board hired attorney Rod Smith to defend the co-op.</p><p>Even before workers were fired, members started taking sides. A March 13 membership meeting with the board drew nearly 200 people, many of whom expressed support for the workers.</p><p>Concerned members started a petition that drew 224 signatures at change.org asking that the board step down. A May 11 meeting that produced the resignation proposal drew about 80 people.</p><p>McNett said the co-op draws a lot of politically driven people who are interested in food issues. “Food is very political,” she said.</p><p>Many have now turned their attention to the co-op's leadership, calling them “bourgeois,” “profit hungry” and “power mongering,” she said.</p><p>At meetings and in Facebook posts, members have said the co-op was founded on the belief that the workers have rights beyond regular workers, that it was not meant to be top-down, that its cooperative values have turned corporate.</p><p>Wayne Cope said he has heard the argument that a co-op can't have a GM since he joined his first co-op 36 years ago.</p><p>“The fact that somebody would say that means they don't know about food co-ops,” he said.</p><p>He referred to the group of concerned members as an “insurgency” that is out for blood.</p><p>“I've heard a bunch of people say, 'It's not a co-op. I don't care if it fails.' They mean that in some way it's not satisfying something, and they all vary on what they define as a co-op. To some, it's got a general manager, so it's not a co-op. That's false.”</p><p>In his timeline, Kragiel said the board received letters of support in a ratio of three to one.</p><p>McNett said most of the shoppers she hears from are supportive of the changes she has made in the store.</p><p>“If I didn't have that, if all I had was people coming in and saying they're pissed off, I would have quit a long time ago,” she said.</p><p>Kragiel said a lot of the conflict has come from people who assume the co-op was designed to be cooperatively managed by workers without reading the by-laws.</p><p>The co-op's articles of incorporation say the cooperative is governed democratically by its members for the mutual benefit of its owners, who include patrons, producers and employees.</p><p>Its by-laws say the board's duties include hiring and firing management and defining the duties of management.</p><p>McNett said she thinks using the words “worker-owner” has led to confusion, especially since the co-op first tried to operate with multiple managers.</p><p>“The words 'worker-owner' give that perception that the workers are the owners, and there's so many other people that own the co-op grocery store as well,” she said.</p><p>Ted La Combe is among the concerned members who negotiated the May 11 proposal and volunteered to serve on the board's transition team that also is asking for more financial transparency and more open meetings.</p><p>He said he has heard and understands both sides of the employee firings.</p><p>“What could have saved that situation is if it had been handled differently,” he said. “Before somebody gets fired, there should be a discussion about a job performance review, a note in the file. That didn't happen. It was very sudden. No consultation. No mediation. No effort to try to make things better.”</p><p>La Combe said Kragiel has done great things for the co-op but that he is confrontational, which has been a big part of the problem.</p><p>When the board turned down the proposal for two members to resign, La Combe said he told appointed board member Rick Nesbit that Kragiel's resignation might be one of the few moves that would bring members back to the store.</p><p>“I told Rick I would not be surprised to see some members give up this effort and just walk away for good,” he said. “The board could win the battle but lose the war.”</p><p>Kragiel told The Sun he would resign only if the 10 volunteers would agree to shop in the store and communicate that to the membership.</p><p>He said the decrease in sales is making it more difficult to thrive, “but the store is not in danger of going out of business anytime soon.”</p>